Commentary on how China and the world are adapting to each other -- or not.

US-China relations

June 06, 2014

The FT's Philip Stephens, in an essay published yesterday, claim that Xi & Putin are "contesting the established world order. " This is an increasingly common take on Russia and China's aggressive approach to their respective border disputes (Crimea, the South China Sea, Senkaku/Diaoyutai, etc.). But I think it's folly and the height of arrogance to portray the US's disagrements with Russia and China as one of a disagreement about the basic rules of the international system.

The first point is to note that Russia and China are acting in highly assertive ways and using coercion to press pursue their territorial interests, but that Russia is being much more aggressive than China, openly challenging and sending troops across existing international borders. Russia's annexation of Crimea and its destabiliization of a sovereign Ukranian regime differ substantially from China's brusk behavior against Philippine and Vietnamese vessels or its placing an oil rig in waters claimed by Vietnam. China would not only have to clearly identify these waters as sovereign Chinese territory but patrol the waters as such and expel others to be in the same league as what Russia has done. Whether it's because they aren't strong enough or some other reason, they haven't. So we shouldn't treat China like they've already taken these steps.

Second, we need a more realistic recognition of the international system and norms. Yes, there are rules and norms on security, economics, and human rights. States have the right to self-defense, but they shouldn't invade or militarily coerce others. There is a multilateral economic system that encourages free trade and the flow of capital. And states should treat their own populations humanely.

But the actual "rules of the road," now the Obama Administration's favorite phrase, are relatively ambiguous. What constitutes military aggression, unfair trade practices, and human rights violations aren't always so obvious. In addition, the United States itself doesn't consistently abide by these norms. The US uses its military power outside its own borders far more than any other country in the world, often unilaterally and without UN approval. It is not a signator to the Law of the Sea Convention and is found in violation of WTO rules as often as any other country. And the US engages in cyberwarfare and Internet surveillence certainly as much as China, if not more. And for anyone who thinks US intelligence agencies don't help US industry as a result of these activities, I've got some property in Florida and Erdos to sell you.

Third, I can't be sure about how Russia defends its actions, but in just about every case I'm aware of, China places its acts in the context of existing rules and norms. Sure, in many instances these are self-serving interpretations, but they are consistently framed in these contexts. China cites the Law of the Sea convention when it suits its interests and cites "historical" claims when it does not. China did not invent the idea of an Air Defense Identification Zone (ADIZ), but borrowed the idea from the US and others. China now uses the fair-trade rules, such as antidumping, in the same way US industry has done so for decades.

In sum, we need to stop being so naive about what the real rules of the road are, especially for large powers. Russia and China may be challenging the US's dominant position, but the US is not a synonym for "world order." If you want to pick sides in these contests, just don't be fooled that you're picking between a fair, open, and peaceful system and a hierarchical, coercive, and brutish system. There are already many aspects of the latter in our current world order. Even as Russia's revival and China's rise are leading to a realignment of the balance of power, this shift is not undermining the basic structure of the international system but reinforcing it.

All of the above does NOT mean I approve of what Russia and China are up to. Actually, quite the opposite. Just focusing on the PRC, I think China's coercion against its neighbors is deplorable. Many of its economic policies that are polluting its environment, sickening its people, and threatening the planet are shameful and should be changed. Its approach toward the Internet and willingness to put aside human rights conerns in favor of protecting the state go against what would be in the country's true interests. But most of these policies and appoaches are being taken within, not against, the current world order. And so if we want the Chinese to change, we should stop lecturing them about norms and instead actually reconsider and address weaknesses and ambiguities of the current system. The Chinese are no longer going to change their ways simply because the US or anyone else says what they're doing violates international norms. We need a new approach that is more realistic about how the world actually works and what kind of world we want.

June 02, 2014

After several years of planning, Indiana University's China office opened its doors on Friday, May 23rd. Although the cover photo for the office's website may exaggerate how clean Beijing's air is, the facility really is state of the art, and will be a very comfortable home for IU faculty, students, and alumni who need to do research and hold meetings in China. For more info on using the facility, visit IU's China Office website.

The opening is officially described in a press release issued by IU, so no need for me to go into much more detail here. But you can see from the "before" and "after" shots, that the space underwent a dramatic change in just a few short weeks.

January 2014: We received the space essentially naked, with no floors, walls, or ceiling. Each tenant in required to install and uninstall all of this when moving in or out. This adds a lot to the cost of the space, but is a boon to the remodelling and interior design sectors.

May 2014: Picture taken from the same physical location. A little different, no?

May 2014: RCCPB Center Coordinator Roy Hooper in the reception area.

May 2014: The view from the reception area toward the conference room and other offices.

May 2014: President McRobbie speaks at the opening ceremony.

May 2014: 75-80 people attended the ceremony.

May 2014: President McRobbie and his Tsinghua counterparts renew our Memorandum of Understanding between the two schools.

The IU Office is located within the Tsinghua University Science (TUS) Park, a 5-minute walk from the East and South gates of Tsinghua University and a 10-minute walk from the #13 subway line. Click here for directions. You're welcome to visit any time!

March 03, 2014

China's Global Times ran a story on Sunday calling the knife attack that left at least 29 dead in the Kunming railway station, "China's 9-11." The story went on:

Any explanation for the attack, like those in previous cases elsewhere in China, would be feeble at the bloody scene, where mothers, sons and daughters were slaughtered by strangers. Nothing justifies such a carnage against innocent civilians.

This was a random attack, with the sole purpose of causing the greatest casualties and impact within the shortest period of time.

It seems that the terrorists have had their way. Their killing spree has left 29 dead and over 130 injured, shrouding the southwestern city and the whole nation in terror.

Although Americans would certainly sympathize with the victims and their families, they would have a hard time seeing the Kunming attacks and 9/11 attacks as equivalents. The differences in perceptions shines a spotlight on the gulf in world views between the peoples of the two countries.

Honoring the Kunming victims, China, 2014

For most Chinese (and 94% of Chinese are Han), as the above quote suggests, the attacks are acts of terrorism against innocents. Nothing could possibly justify these actions. By contrast, for Americans, the Kunming incident fits primarily into a broader story about China's suppression of ethnic minorities. The attackers appear to be Uyghurs, a Muslim ethnic group living mainly in China's Xinjiang region. Evan Osnos, writing in The New Yorkertoday, captured this sentiment in his post-mortem (literally), by not emphasizing the death toll and victims in Kunming, but the harsh conditions Uyghurs face in Xinjiang that could prompt them to take such drastic action.

(For those wanting more background, my colleague, Gardner Bovingdon, has written one of the most extraordinary books on this topic, The Uyghurs: Strangers in Their Own Land, 2010, Amazon. His book is distinctive not only for the depth of its insights, but also for the balance he brings to the analysis, not accepting any one side's propaganda at face value.)

Honoring the 9/11 victims, Toledo, Ohio, 2002

Such an interpretation leaves most Chinese dumbfounded. They can't see how there could be any reasonable justification for the attacks, which somehow might legitimate the deaths of the victims. And even if it makes sense to dig into the motives of the perpetrators, they would likely be surprised that the discussion turned in that direction within hours of the attack, as soon as Beijing identified the likely assailants.

The equivalent turn would be those who in the immediate wake of 9/11 explained the attacks as a response to US policies and military actions in the Middle East. The most famous domestic voice came in a brief commentary by Susan Sontag in, ironically, The New Yorker, in its September 24, 2001 issue.

Where is the acknowledgment that this was not a "cowardly" attack on "civilization" or "liberty" or "humanity" or "the free world" but an attack on the world's self-proclaimed superpower, undertaken as a consequence of specific American alliances and actions? How many citizens are aware of the ongoing American bombing of Iraq?...

...A lot of thinking needs to be done, and perhaps is being done in Washington and elsewhere, about the ineptitude of American intelligence and counter-intelligence, about options available to American foreign policy, particularly in the Middle East, and about what constitutes a smart program of military defense. But the public is not being asked to bear much of the burden of reality. The unanimously applauded, self-congratulatory bromides of a Soviet Party Congress seemed contemptible. The unanimity of the sanctimonious, reality-concealing rhetoric spouted by American officials and media commentators in recent days seems, well, unworthy of a mature democracy.

She faced a storm of criticism for her remarks. But with a few substitutions, this could replicate analyses of Chinese heavy-handed policies and hubris that have generated deep-seated resentment by Uyghurs. It's not surprising that Chinese would be just as pained by potential justifications of the Kunming attacks as Americans were caught off guard by Sontag's analysis.

That I see parallels in the gulf between how Americans and Chinese see 9/11 and 3/1 does not mean that 9/11 and 3/1 are genuinely equivalent with each other. Simply in terms of scale, there is no comparison. Moreover, in Kunming the targets were in a common transporation hub in a southwestern city located in a province populated with a large number of other ethnic minorities. The 9/11 attacks were directed at the physical and symbolic hearts of American economic, political, and military power. The car bombing a few months ago in Tiananmen Square comes closer but still doesn't seem to me to carry the same symbolic weight of simultaneous attacks on the World Trade Center and the Pentagon (not to mention the potential final target of the plane that crashed in Pennsylvania).

The crux of the comparison between 9/11 and 3/1, though, comes down to the legitimacy of analyzing the motives of the attackers. In the US, once the initial wounds of 9/11 healed, and particularly in the wake of the 2nd Iraq War ("war of choice"), there's been some consideration of how the US presence in the Middle East, as well as how the US has carried out the "war on terrorism" has generated anti-Americanism and been a recruiting tool for Al-Qaeda. But that navel-gazing has been limited. The US military has for the most part departed Iraq and is winding down in Afghanistan, but the American political establishment views such moves as tactical shifts in terms of what is best needed and effective in maintaining US global dominance. The American government has not waivered from the fundamental position that it could and should operate anywhere on the planet militarily to protect its interests.

Although it would be wise for Beijing to consider how its policies in Xinjiang have generated antipathy, dissent, and violent responses, I don't know if now, just days after 3/1, is the right time for our attention. For the time being, Kunming seems the place deserving our focus. Even if one sympathizes with the desire for genuine Uyghur autonomy, aren't we all Kunmingers? No matter how unfair Beijing's policies are, let's agree that stabbing travelers standing in a train station on a Saturday night, or flying planes into high-rise offices where employees are diligently working on a quiet Tuesday morning can never be justified.

December 27, 2013

Arthur Levitt, a former SEC Chairman, had a nice, consolling gift for American banks operating in China in the form of a Wall Street Journal op-ed on Christmas day. He catigated the current SEC leadership and other American regulators for going after JPMorganChase and other banks who hire the princelings of Chinese leaders in order to promote their businesses.

He justifies the practice in three ways. First, he says it is so commonplace in the US that it would be hypocritical to outlaw it in China. He writes:

The accusation is scurrilous and hypocritical. If you walk the halls of any institution in the U.S.—Congress, federal courthouses, large corporations, the White House, American embassies and even the offices of the SEC—you are likely to run into friends and family members of powerful and wealthy people...

Whether this is right or wrong, unfair or fair, is not the point. It is hypocritical of financial regulators to criticize—even penalize—practices abroad that are commonplace in Washington, New York and other seats of political and economic power.

Were the SEC to be completely consistent in its approach, it would have to come down hard on the same practices here in the U.S. And the agency would have a field day. Members of Congress and the executive branch regularly hire the children of major donors. Regulators would find scores of examples of men and women, occupying internships and entry-level positions in U.S. corporations, who were hired on the say-so of someone much higher up in the organization.

His second justification is that such hirings are critical for business success. You're more likely to get high-quality personnel based on personal recommendations, and such individuals are invaluable "assets" because of their connections.

His last criticism is that if we outlaw hiring based on personal ties, it would be impossible to know exactly where to draw the line. So don't, and allow any and all kinds of hirings.

Mr. Levitt's op-ed is galling for three reasons:

First, for the former head of the SEC to make these arguments runs against everything the US lectures China and other countries about with regards to their financial systems. And I use the word 'lecture' intentionally. US authorities have for decades lectured bankers and financial regulators in other countries that they need to root-out personal ties, conflict of interest, and corruption from their financial systems and have banks operate on a "commercial basis," that is, make loans and investments based on the commercial merits of the transactions and the credit worthiness of the borrowers. The US government, the EU, the IMF, and Western banks all pinned the Asian financial crisis on such personal ties, what has been termed "crony capitalism." And this perspective is what drove the IMF and others to attach extremely rigid conditions to their bailouts and forced extensive restructing of the financial systems across the region. And in case he forgot, the US just went through one of the deepest financial crises in 70 years, and we should recognize that some of the sources of the crisis lay in the cozy ties between our banks, investors, and regulators.

Given such lecturing and our own recent experience, it's beyond ironic that the Mr. Levitt is now arguing that such behavior should not only be permitted, but it should be encouraged and respected.

Second, I actually do not have a problem with hiring employees partly on lineage, nepotism, and connections. Financial markets are highly regulated everywhere, even more so in China, and getting through that maze of regulations takes people with knowledge of not only the written regulations but the people assigned to implement those regulations.

But it would be wrong to say, as Mr. Levitt does, that anything goes. Some hirings create a conflict of interest or the perception of conflict of interest. Whether opeating within the US or abroad, American banks should be required to avoid conflicts of interest whenever possible. Moreover, they should be required to disclose such conflicts of interest when they could potentially materially affect those who entrust their business to them. If JPMorganChase and others had not tried to hide these practices and been more open about them, perhaps the regulatory and public reaction would not have been so harsh. If these are acceptable -- and even honorable -- practices, then these banks should have no problem being more transparent about what they're doing.

Third and finally, just because influence-peddling is common within the US does not mean we should just allow it everywhere else. And just because it is hard to know where to draw the line doesn't mean we shouldn't try. We need to make America's rules more stringent and enforce them better, not simply throw up our hands and stick our heads in the sand while his banker friends run amok. This applies to all the various areas of financial regulation, from hiring practices to grey markets to credit ratings to insider trading. The US financial system is far from perfect -- Dodd-Frank fixed some things but made others worse and left some problems unaddressed -- and there are important areas of regulation at the international and trans-national levels that needs to be addressed.

So there is no need to be puritanical, but let's be reasonable and encourage practices that are not geared to helping powerful banks and investors, but serve the broader economies and societies. What's good for JPMorganChase and Goldman Sachs may not be what's good for America -- or for China.

December 05, 2013

Today in Beijing Vice President Biden issued a strong and candid defense of a free press. In his speech to US business executives he said, "innovation will thrive where people breathe freely, speak freely, are able to challenge orthodoxy, where newspapers can report the truth without fear of consequences." He went on, saying that "We have many disagreements, some profound disagreements on some of those issues right now - the treatment of U.S. journalists."

Of course, he is referring to the difficulty of reporters from the New York Times and Bloomberg getting accredited, as well as the daily hassles foreign reporters face in China. Their treatment truly is unreasonable and self-defeating, as reports on these problems generate further negative stories on China. More importantly, if journalists had greater access to all of China, official and unofficial, there would be more positive stories out of China. If China thinks it can force foreign media to simply report on China through their officially approved framework, then it is mistaken, and every day it is losing the battle for the minds and hearts of Western audiences. (I think their efforts at ideological control also have a corrosive effect on Chinese people's view of their own government as well.)

Seen in that light, I applaud the Vice President for sticking up for foreign correspondents, which was the centerpiece of an excellent post today by Elizabeth Economy of the Council on Foreign Relations.

At the same time, Biden's comments lose some of their power as a result of his own government's efforts to constrain the media. The White House itself has gone to great lengths to shape coverage of the President, including limiting press conferences and increasing the use of the White House's own staff photographer and keeping out press photographers from certain occasions. Even more important are the revelations from Edward Snowden that are emerging through the New York Times and Washington Post. The USG has put a great deal of pressure on these organizations and their reporters and has taken the position that everything being released and reported should not be. The British government has taken an even more hostile tact in dealing with the Guardian. Just as important, the activities of the NSA and the complicity, in part intentional, of Amerian hi-tech companies, is giving greater impetus to the end of the borderless Internet. Countries and companies are doing more to take as much control as possible of their telecommunications networks, and this inevitably will reduce the free flow of information.

In short, the US government itself has taken steps, particulalry in the wake of 9/11, to exert control over the media and communications networks that has the effect of chilling investigative coverage and open discussion of issues that may expose the US government to embarrassment and uncover wrong-doing. (For a deeper discussion of the weaknesses of the American media, see the superb exchange from late October in the New York Times between Bill Keller and Glenn Greenwald.)

None of this is meant to reflect an equivalence of China's hard-fisted and explicit media crackdown and the more nuanced and less overt efforts at manipulation and ubiquitous surveillance by the US government. The Western press is still far freer than the Chinese media, even liberal elements such as Caixin Media and Sina Weibo. However, it wouldn't surprise me if in light of what the US does, Chinese would see Vice President Biden's comments as hypocritical and self-serving. They may conclude that the US likes a free press when it hightlights the deficiences of other governments, but as soon as it turns its gaze on "core US national interests," that commitment may be less firm. The Vice President would be on firmer ground vis-a-vis the Chinese if the First Amendment was better protected at home. And Americans would be better off as well.

Biden's approach reflects a broader "bipolar disorder" in how Americans typically engage China. (I'm, of course, only using this term metaphorically.) When we are discussing and debating issues domestically amongst each other, we recognize that there are lots of problems with existing policies and laws. This not only applies to the media, but, speaking from my admittedly liberal perspective, to the decline of privacy in general, our expensive health care system that leaves many without access, the growing gap between rich and poor, extensive corruption in Washington and state capitals, our decrepid physical infrastructure, the prevlance of guns that annually results in thousands of deaths and injuries, a weakly regulated financial system that favors big banks over small investors and consumers, a patent and copyright system that also favors large companies over consumers, continued racism, gridlock in Washington, and an education system that is generating declining abilities in math, science and other subjects. But when the Vice President and other officials go to China -- or meet them anywhere -- we tend to suppress and ignore these problems (or say they're irrelevant to the issue at hand), and tell the Chinese that the US stands for important principles such as the free market, a level playing field, human rights, and not using coercive force against peaceful countries, and therefore, China should yield on specific demands the US makes.

Not only should we expect that China give more access to foreign correspondents, not to mention their own journalists, the US needs to be less "bipolar" and not pretend that the problems we have do not exist when we are talking and negotiating with others. Some may worry that doing so would feed the Chinese propaganda machine that the US is a terrible place and declining country. But I think doing so would have a more positive effect on America's image in China and make American negotiators more effective, not less. We would also gain greater control over contextualizing these problems and take that power away from China's propagandists. We should feel comfortable being open about our problems because the US has so many amazing strengths that we and the Chinese can admire, and we have a system that can be quite good at addressing these weaknesses.

So I encourage Biden and other US officials to not only tell it like it is -- and should be -- in China, but to not ignore how it is in the US as well. We'll be a better country and have a more effective foreign policy by doing so.

Vice President Biden is completing his visit to China as part of his broader trip through the region. Although China's announcement of a new Air Defense Identification Zone (ADIZ) has dominated the headlines and been a central part of the discussions everywhere he goes, he has addressed a great many issues during the past several days.

I'm particularly struck, though, by the sweet and sour mix of his meetings with Xi Jinping. They in a nutshell embody what may be enduring elements of the broader US-China official relationship.

On the sweet, positive side, there was genuine, sustained personal engagement and substantive back-and-forth. The briefing by a US official stressed how good their personal relationship is and how they talked broadly and strategically about many issues in ways that did not simply sound like negotiations. This is a huge improvement over the interactions during the 10 years of Hu Jintao's leadership. He never deviated from the the cue cards.

Second, the Chinese and Americans aren't letting disagreements on some issues hold the entire relationship hostage. The ADIZ problem isn't stopping cooperation in other areas the way a crisis would've put everything else up in the air, at least temporarily, as in the past, e.g., the 1995-96 Taiwan Straits Crisis and the May 1999 embassy bombing. The two countries are collaborating bilaterally, regionally, and globally on a host of issues. For example, in the midst of these regional events, the Chinese are in Bali at the WTO ministerial, and they've been sufficiently cooperative for there to be a deal. The recalcitrant party is India, which is opposed to a deal for ideological reasons.

And third, the disagreement over the ADIZ is being contested through international rules and their different interpretations. China did not draw vague lines in the western Pacific and start shooting willy nilly. Instead, they studied assiduously about precedents regarding ADIZ's in other countries (22 other countries have ADIZs). They gave very precise geographic coordinates, developed a justification, and are seeking recognition of its existence by others as a basis for their sovereignty claims. Of course, the Chinese are trying to change the facts on the ground (and we should expect other ADIZs before too long), but the attention to international legal frameworks is significant and now commonplace in just about everything the Chinese do.

On the other hand, the relationship has some sour, negative dynamics. Good personal atmospherics didn't stop Xi and Biden from articulating differing positions across a range of issues, from the ADIZ to cyber to human rights. The US and China have narrowed their differences on many issues over the years, but there may be hardwired limits to how much overlap there is in their interests. The two countries compete economically and for strategic influence, and they have different values regarding human rights.

Also, although the two sides are able to compartmentalize and keep problems from bringing the entire relationship into doubt, one does wonder on what issues the US is willing to draw a line. The US is willing to bring cases to the WTO, stop individual Chinese investments it finds threatening, speak out on individual human rights violations, critique specific Chinese military actions, and engage in its own "rebalacing" effort. On the one hand, this represents a cautiously optimistic hedge strategy in which the US promotes cooperation wherever possible but simultaneously deals with areas of disagreement in a forthright manner. But I do wonder sometimes if this is tactically wise and strategically foolish. The bet from the US side is that extended engagement is socializing the Chinese to accept current international norms, but to use a football metaphor, it may be that the US is just gradually and imperceptably giving away field position as China advances downfield. China's bet may be that the US gradually declines and its willingness to defend allies and its own interests so far from the US mainland declines. (Take a look at the most recent polls on the growing isolationism of many Americans.)

Which brings us to the third point. The US has been focused on encouraging China to follow international rules and norms, expecting that compliance in and of itself will make China a status quo power. But the rules don't just promote cooperation; they are also used for competition. And China's greater attention to the international rules of the game is making it a better player at the game. They still do not have the reputational stripes of the US and Europeans, or even the Brazilians, but just because the game has moved from the streets to court houses, press rooms, legislatures, and negotiating tables house doesn't mean competition is going away.

The cumulative result of all of this is a complex relationship characterized by simultaneous cooperation and competition, extensive interaction and communication yet sustained disagreements, and a greater use of legal and regulatory tools on both sides as part of this competition. Such a relationship is competitive, but the extent of interdependence and the location of engagement is quite different than that between the US and Soviets. Perhaps we are in for a long sweet and sour era of lukewarm peace.

November 28, 2013

Given Japan's treatment of China in the first half of the 20th century it's no surprise that many Chinese hold very negative feelings about the land of the rising sun. At the same time, Beijing does go over the top, using educational texts, movies, and other means to highlight this past. The goal is to essentialize this earlier behavior as eternal Japanese character traits that disqualify Japan from the right to have a military, to be a leader in Asia, and have a permanent seat on the UN Security Council. With Japan sidelined and the view of many in China that the US is not genuinely a part of the region ("Asia-Pacific" is a US myth to many Chinese), it would leave China as the only legitimate leader for the region.

But China's approach toward Japan is not winning it any friends, and I expect this is entirely frustrating to Chinese. In the Fall of 2010, a Chinese fishing vessel collided with the Japanese Coast Guard, and the fishing boat's captain was detained for several days. In addition to permitting public protests, China responded by temporarily shutting off exports of rare earths to Japan. These metals are vital to a variety of Japanese industries, and the goal was to teach Japan a lesson by showing how dependent it is on China's good will. But to China's surprise, the US and other countries interpreted China's scheme as an indictor that China only followed international rules when convenient and could dismiss them whenever necessary. The US, EU, and Japan later sued China in the WTO over its broader policy of export restraints for rare earths and won the case this past summer. The effect on the rare earths sector was minimal -- demand had already fallen dramatically -- but a broader point was made.

It apparently fell on deaf ears because China is at it again. This time Beijing announced a new "air-defense identification zone" that intentionally includes the Diaoyu Islands/Senkakus, a large swath of Japan's own IDIZ, and even a small segment of South Korea's IDIZ. Chinese appear to believe that their strong negative views of Japan must be shared by others, and that no one would come to Japan's defense. Wrong again. The US immediately flew two B-52's over the airspace without prior notification to Beijing and in contradiction to Beijing's original pronouncements, the US faced no consequences. Other countries in the region have criticized China's effort as going too far and appear to welcome the US's display of disregard for China's assertion of new rights.

China's approach toward Japan is self-defeating. Taking an aggressive tact toward the East China Sea and Diaoyu Islands/Senkakus will not win Beijing any friends; in fact, it will push others into the waiting arms of the United States and Japan. It may also have the effect of reducing tensions between South Korea and Japan. (It is not even clear to me this is popular domestically given that it raises the prospect of conflict, and average Chinese aren't really interested in going to war over a small group of uninhabited islets.)

Despite previous history, and even the denial of that history by a tiny segment of the Japanese population, Chinese are going to need to figure out how to come to terms with this past and put it in the past, entirely. China's Japan complex could end up being a chain that keeps China from fulfilling the "China Dream" of becoming a well-off society and respected globally.

November 07, 2012

The winds are blowing West, and this is good for US-China relations and addressing global problems.

Why am I more than cautiously optimistic?

The "feeling out" period often associated with new administrations will be much shorter and less bumpy than had Romney prevailed. Secretary Clinton and perhaps some other cabinet secretaries will likely step down in the Spring, but there should be substantial continuity in personnel. More change will come on the Chinese side, but most of the new leaders have already been on the scene and engaged with the US and international affairs for some time. The main adjustments will be adapting to Xi Jinping's style and the new slate of members on the Central Military Commission.

The victory allows Obama to carry out his domestic policies with renewed vigor. Although Obama did not win a clear policy mandate, and the House of Representatives is still in Republican hands, he and the Democrats performed impressively. The economic recovery is likely to continue and improve, and the US's long-term demographic transition is likely to benefit the Democratic Party. There will be tremendous pressure on the Republican Party to give up its strategy of opposing Obama at every turn. Hence, we should see a rollback of the Bush tax cuts, full implementation of Obamacare, and greater attention to US industrial competitiveness.

Obama's policies toward China and East Asia will continue along the same trajectory developed over the past few years. Aside from token criticism of Obama's weakness vis-a-vis the Chinese curency, Romney and the Republicans had very limited critiques of Obama's foreign policy (see the second debate). The 60-plus official bilateral fora for dialogue and cooperation will continue. At the same time, the US will proceed with using the WTO and bilateral antidumping and counterveiling duty investigations as a way to push Chinese economic policies to be less harmful to US business interests. Efforts to adopt a Trans-Pacific Partnership will continue apace and perhaps with a greater PR campaign. The US will continue to highlight the importance of freedom of transit and the peaceful solution of territorial disputes in the South China Sea and expand cooperation with countries on China's periphery. And without the specter of another election, Obama may be more willing to engage multilaterally for a mini-Doha package and a substantive deal on climate change through the UN process.

China could be on the defensive for the next few years. In early 2009, because of the global financial crisis, Obama began his presidency in a weakened position, and China's star seemed to be rising quickly. Now things look different. It is the US that is resurgent, and there are serious concerns about China's economy, in the short term due to substantial growth in debt, and in the medium/long term due to the difficulties of shifting toward a more efficient economic growth model. Although there are understandable concerns about a flair-up with Japan, I don't expect China to assume a nationalistic defensive crouch during this period. That is because the likely new Politburo Standing Committee will be relatively reformist in character, closer in temperment to the group in power in the 1990's (not surprisingly, Jiang Zemin has had a big hand in shaping the incoming group). I expect the new Chinese administration to adopt policies that help China gradually overcome many of its economic challenges (although I don't see democratic reform on the horizon). In the near term, these problems may be serious enough to constrain China's assertiveness.

In March 2012, Kenneth Lieberthal and Wang Jisi issued an important report highlighting the strategic distrust that has seeped into the relationship. I do not see that distrust dissapating easily and replaced by a straightfoward, uanbashed partnership. However, I do think the continuity of leadership on the US side, the potential greater US confidence domestically and internationally, combined with serious challenges in a China headed by a more reformist leadership may create an environment for greater cooperation. The US may be more ready to compromise on some aspects of the Doha Round and climate change, and China may need a more stable periphery and explicit support in a way it hasn't shown of late.

Thus, in multiple ways, there is a chance to re-live the 1990's all over again, but this time get it right. When the Clinton Administration came into office, the US had vanquished the Soviets and Iraq. It took over a year for the president to drop the "Butchers of Beijing" rhetoric and extend MFN to China without condition. The relationship improved somewhat, but was still hit by the Taiwan Straits crisis and the mistaken bombing of the Chinese embassy in Belgrade.

More broadly, although the Clinton Administration got the US economy rolling again (or at least supported trends eminating from Silicon Valley and elsewhere), signed NAFTA, and got the WTO launched, more could have been done in terms of addressing climate change, limiting nuclear proliferation, enhancing mechanisms of cooperative security, and adopting policies that really fostered economic development and state-building in developing countries. That agenda was cut short by the Bush victory in 2000 and 9/11. We can't erase those 8 years, but it's possible the Bush era could be seen as an interregnum, a pause taken to deal with immediate threats that pushed back addressing deep-seated, long-term global challenges.

And if China is entering a period where they recognize a new wave of domestic reform is needed, then we really could be back in a similar situation. Of course, we cannot unwind the 2000's -- the threat of Middle East terrorism, the damage to the US economy, and China's emergence -- but with Obama repeating Clinton's successful re-election bid, it does feel a little like 1996.

And if you listen, you can hear Celine Dion singing her hit of the year, "Because You Loved Me."

October 23, 2012

China featured prominently in the 2nd and 3rd US presidential debates, in fact, more in the 2nd than the 3rd, even though the latter was on foreign policy. Although there has been handringing in Beijing because President Obama and Governor Romney have emphasized the competitive nature of the relationship and the need to have China play by the rules, neither has given many specifics about policy going forward. Also, both have used essentially the same formulation, "We want to be partners if China plays by the rules." That is essentially consistent with the approach taken since the middle of the Clinton Administration.

The most detail we got from Romney is that, "On Day One I will label China a currency manipulator." That implies he will institute sanctions or penalties against China because the RMB is undervalued. Maybe, but not necessarily. There are several steps that have to occur between his declaration and sanctions, and none are automatic. So this moment of supposed policy precision is just another example of Romney being Romney. In fact, we have absolute zero idea what Romney's policies toward China -- or essentially anywhere in the world -- will be.

President Obama's position seems clearer. He'll continue his policies of the last 4 years, particularly since the administration adopted its "pivot" to Asia in 2010/11. Obama will continue to go to the WTO, since as he noted, the US has been so successfl there. By my count, it has won 9 of 10 cases against China in Geneva. He also was perhaps unexpectedly honest about the Trans-Pacific Partnerhsip (TPP). He did not mention these words last night, but when he said the US is organizing countriesi in the region to adopt an agreement on trade and investment principles that sets high standards and that should put additional pressure on China, he meant TPP. This framing gives the agreement a sharper edge than perhaps the administration has been suggesting in public, but one can see why Obama would do so in the context of the campaign. He may have also concluded that there is no way China would ever sign on, at least initially, so there's no harm in being more explicit about the TPP's goals.

Switching gears, in 2011, China sold less than 9,000 electric or hybrid vehicles. At the time I remarked how this was a horrible record for a country supposedly so intent on promoting green energy. Things have only gotten worse. According to Caixin, in the first 3 quarters of 2012, China has sold only 235 electric cars. That is essentially zero and means there is no support for this sector whatsoever. China reportedly did export 7,500 electric cars. If so, we are seeing the same pattern as in the solar sector: export over 95% of production. This means solar and electric vehicles are part of a global trade strategy but not central to domestic energy or conservation policy.

July 14, 2012

Caixin reports that visa applications to the US were up 43% in the 2012 fiscal year. If that's the US government's fiscal year, that means from October 1, 2011 to June 30, 2012. Here's part of their story:

U.S. Processes Over 1 Mln Visa Applications from China

The U.S. State Department said on July 12 that over one million Chinese visa applications had been processed in the 2012 fiscal year, a 43 percent increase from 2011. The increase is the result of measures taken to attract more Chinese visitors, including expanding staff and reducing waiting times at U.S. embassies.

Besides greater efficiency, might this in part also be a result of China's sluggish growth? After the financial crisis, where China did not suffer as much as others and then launched an RMB 4 trillion stimulus, there was a wave of returnees, and I'd expect, a relative decrease in visa applications to go abroad, including to the US.

This is just total conjecture. I'd welcome info from someone more informed.

January 22, 2012

Here is a terrific story from the New York Times on the globalization of Apple. The company has moved jobs around the world to both save on costs and to take advantage of the more flexible and better quality manufacturing facilities and talent that are in Asia.

The reporters present a very balanced story; this is not just about a greedy company willing to exploit powerless workers to get rich. It has been forced to diversify production to become more efficient and produce better products. Some contracted workers in Asia work 12-hour shifts and 6 days per week. When an employee in northern California was asked if he would do the same, he said he wanted his Saturdays free so he could watch his kids play soccer.

I saw one big thing missing from the piece. Although from an employment perspective Asia and China have benefitted imensely from globalization of the consumer electronics supply chain, China participates at the lowest value-added segments of the production of the iPhone. Most of the value-added comes from the US, and most of the profits go to Apple, not suppliers. China is having an extremely difficult time moving up the value-added chain; the story highlights China's ability to provide a flexible workforce and modify manufacturing on a dime; but Chinese firms contribute little to the design of the iPhone or other popular consumer electronics.

The difficulty of being more innovative is a central concern across China. Following the death of Jobs, there was a big conversation on blogs here, "Why does China not have a Steve Jobs?" So far, the main solutions have been to crank out a lot of engineers and scientists, throw a lot of money at R&D, ramp up establishing patents and standards, and provide protection for domestic firms against foreign rivals. Still missing is encouraging creativity in the educational system, opening up the media and flow of information, more seriously protecting IPR for innovators, and making capital more accessible to private business. My guess is that there are lots of innovative people in China, they just live in a non-supportive environment.

Hence, for the time being, China is mainly benefitting on the employment side of hi-tech; if it ever manages to move on reforms that would promote product-level innovation, then China would be in the driver's seat globally. So it seems as if the US and China are mirror opposites. China needs the US's innovative environment, and the US needs a deeper sci-tech workforce and better infrastructure to support manufacturing. Not surprising their economies are so intertwined.

Full disclosure: I'm an iPhone 3Gs owner and just switched from a Dell to MacBook Pro laptop. I love both, but I hope Apple will make Word work better on my Mac; it has been far from a seemless transition, which is the fault of Apple and Microsoft. Also, why on earth can't I easily delete text in front of the cursor (and not just back-up)? I can do so in email and on the web using Ctrl-D, but that does not work in Word; and really, I should just have to hit one key for this, not two. I suppose these are minor complaints, but Apple should be all about the user experience.

December 20, 2011

The International Centre for Trade and Sustainable Development (ICTSD), based in Geneva, just issued a very good report on the policy implications of the first decade of China's membership in the World Trade Organization.

There are some terrific contributions by scholars, journalists, and poilcymakers, including Paul Blustein, Gary Hufbauer (Peterson Institute), Henry Gao (Singapore Management University), Razeen Sally (European Centre for International Politics and Economics), Sun Zhenyu (China's former ambassador to the WTO), Yi Xiaozhun (China's current ambassador to the WTO), and Faizel Ismail (South Africa's ambassador to the WTO.

December 14, 2011

China this year celebrated a variety of anniversaries, including the 100th anniversary of the 1911 Xinhai Revolution and the 90th anniversary of the founding of the Communist Party. Also deserving of celebration is the 10th anniversary of China's entry into the World Trade Organization. China's application was formally approved on November 10, 2001, and it officially became a member on December 11, 2001.

I don't know if folks in the Ministry of Commerce are having a cake with candles, or if Jiang Zemin and Zhu Rongji, the leaders most responsible for China's entry, are popping bottles of champaign, but the rest of us should.

Many of the Westerners attending the festivities have decidedly been party-poopers, focusing primarily on those areas China has not come into compliance or the ways China has figured out how to bend the WTO rules so that it gets what it wants without being subject to harsh penalties. One day after the anniverary, the U.S. Trade Representative issued their annual assessment of Chinese compliance, which was decidedly mixed. And on Tuesday, the Congressional-Executive Commission on China held a hearing, and the atmosphere was hardly celebratory.

I'll leave the dicing of the report and the hearing testimony to others, but here's my five big takeaways from China's membership:

1. The economic benefits to China and the rest of the world have been massive, and far more important than the negatives. Chinese trade and investment have expanded dramatically, and this has created millions of jobs in China and elsewhere. Although a significant amount of manufacturing jobs have shifted from to China, in part from the US, but mainly from around China's neighbors, the integration of China into global production networks has allowed companies elsewhere to stay in markets they otherwise would have exited and move up the value-added chain; and consumers everywhere have benefitted from the reduced prices and increased quality that global production and innovation networks have facilitated. Some may want to partly blame China's unbalanced economic growth for contributing to American unemployment or the financial crisis, but my view is that the problems of the American economy are largely self-inflicted. Send your thank-you notes to Alan Greenspan, the toothless Securities & Exchange Commission, and a Congress that is uanble to fundamentally reform health care and education or sufficiently invest in America's infrastructure.

2. Joining the WTO has led China to not only reform its trade regime, but also adopt a slew of beyond-the-border reforms governing just about every corner of the economy, society, and policy process. Ed Steinfeld marks many of these changes in his Playing Our Game (2010); he associates these changes strictly with Chinese integration into global production networks, but that trend accelerated massively because of China's WTO entry. China is far from a liberal, free-market economy, and many of its economic policies are wrong-headed and will generate lots of waste, but the distance between China and others has narrowed by a wide margin. It's perfectly reasonable to discuss China in the context of capitalist economies writ large.

3. The process by which trade conflicts with China are addressed has improved dramatically. Long gone are the two-seconds-before-midnight negotations in which failure means the implementation of rigid sanctions and the imperilment of the entire relationship. Late-night bargaining is now reserved for more mundane, incremental bilateral issues.You don't like how conflicts are addressed in the WTO? Perhaps you'd like to be an iron ore trader and play by the hard knuckle rules of commodity pricing. In 2009, deep in the middle of negotiations over annual iron ore prices, fretting over a likely loss, the Chinese arrested the folks on the other side of the table, four Rio Tinto employees. (Rio Tinto and the other iron ore providers were so spooked by the experience, they cancelled the negotiating ritual, and now prices are set according to a standard index.) At least in antidumping cases or WTO disputes, the chances of anyone doing time in a Chinese jail or having something worse befall them have been essentially eliminated.

4. China's compliance record is just about as good -- or bad -- as any other major WTO member. China has lost just 8 WTO cases during the last decade, and it has reformed its domestic laws to come into compliance in 7 of these cases. That record is just as good as that of the US and EU, both of whom have lost a lot more cases and in several instances have not come into compliance. Think American cotton. Think Airbus subsidies. Of course, the big worry about China isn't the official win-loss record, but whether its economic system simply doesn't fit the spirit of the WTO. If you think the WTO is about promoting one type of economic system, then you may be right. But if you think the WTO is about permitting some substantial variation and creating a system for adjudicating among these differences, then China is far from destroying the system. And we should be realistic, the WTO is not immune to power politics; wealthier and stronger members will always be able to get away with more than the weaker members. That may not be fair, but even with these imbalances, the WTO is fairer than almost any other international organization out there.

By the way, anyone who thought China joining the WTO would mean China would be perfectly liberal obviously don't know much about China; they know even less about the rules of the WTO, which provide -- intentionally -- dozens of legitimate excuses for members to protect domestic industry. China's continued limits on market access in part reflect simply avoiding explicit commitments; but this also reflects its ability to skillfully use the rules the US and EU wrote. Changing Chinese behavior not only requires pressuring China, it requires reforming the WTO. The United States is opposed to some of these reforms, for example regarding the use of antidumping measures.

5. In a show of staged choreography, Taiwan joined a few weeks after China, and so will celebrate its 10th anniversary at the end of this month. It's a shame no one is lighting candles for the "Separate Customs Territory of Taiwan, Penghu, Kinmen nad Matsu." Have you noticed the state of cross-strait relations of late? Not too darn bad. The economic relationship expanded dramatically even as Mainland expressed clear distaste for Chen Shui-bian. And last year the two sides signed a wide-ranging deal, the Economic Cooperation Framework Agreement (ECFA), that ought to expand ties even further. ECFA would have been impossible without both sides' membership in the WTO. Is long-term peace across the Taiwan Strait assured because of such economic ties? Of course, not. But the extent of share interests has made such a turn appear far less likely than was the case during the 1995-96 Straits crisis, let alone during the 1950s and 1960s.

Am I polyanish? No. I think China, the US, and the WTO all have serious problems they need to address, and if they don't, that spells real trouble for everyone. But if a straightforward thumbs up, thumbs down vote for Chinese membership in the WTO were held today (in the US in 1999, the vote was over whether China should receive permanent MFN), and we already knew what this last decade would be like, the decision would be simple: a big, big thumbs up!

November 01, 2011

This past weekend's conference, "The 10th Anniversary of China's WTO Accession: China's Learning Curve," went off extremely well. I had the same worries as a restaurant owner -- the kitchen may be a little chaotic, but as long as the customers enjoy their meal (and don't look in the kitchen), then everything will be okay. I think the conference served up some nutritious food for thought.

Some highlights of Day 1:

Long Yongtu, China's chief WTO negotiator, gave a subtley worded critique of current economic policies. When China joined the WTO, it made policies changes which were domestically seen as "progress" (进步), but are now criticized as "concessions" (让步). He said he is worried that China may be getting further and further away from the spirit of the WTO. His concerns were echoed, more directly, by Christian Murck, President of the American Chamber of Commerce in China, and Dirk Moens, the Secretary-General of the EU Chamber of Industry & Commerce.

In his keynote address(Download Day 1 Robert Wang WTO Conference Remarks 10 29 2011), Robert Wang, American Deputy Chief of Mission, struck a balanced pose. He praised China for the distance it has travelled in economic development and reform the past 10 years, but he noted the concerns the US and others have about China's recent economic policies, including currency policy. He also stressed that China can't avoid taking on greater responsibility in the WTO just because it is a developing country. In perhaps the most memorable line of his speech, he said: "As our trade negotiators are fond of saying, no doubt to the annoyance of their Chinese colleagues – 'China is not Chad.' And the fact of China’s astounding success as an exporting power means that China carries considerably more responsibility than was the case ten years ago with regard to the liberalizing mission of the WTO."

On the Doha Round, Huang Rengang, Deputy Director-General of the Ministry of Commerce's WTO Division, said China would obviously like to see the Doha Round reach a successful conclusion, but there need be no rush to a conclusion. He joked that trade ministers weren't tired of negotiations but rather were addicted to them. Ricardo Melendez-Ortiz, Chief Executive of the International Centre for Trade and Sustaintable Development in Geneva, outlined a wide range of initiatives the WTO can take even with a stalled Doha Round to promote liberalization and development. Rorden Wilkinson of the University of Manchester said that the WTO and its members need to go back to first principles and decide once again what the main goals of the organization should be; he argued that liberalization and other policies should more squarely be in service of development and poverty alleviation.

Several speakers, including Tang Wenhong of MOFCOM's Law and Treaty Division, noted that China had moved rapidly up the learning curve in the dispute resolution process. China has been a respondent in 23 cases and a complainant in 8. Xiao Jin, a partner at the law firm King & Wood, noted that China has complied with negative rulings in at least 7 out of 8 cases it has lost. Philippe De Baere, a partner at the Belgium-based law firm Van Bael & Bellis, gave a run down of China's victory in the "metal fastners" (nuts and bolts) case, showing how the portion of the European Union's antidumping regulations related to non-market economy status were found wanting and had to be changed.

On Day-2, we turned our focus to analyzing 11 pieces of research conducted as part of the RCCPB's Initiative on China and Global Governance.The papers can be found on the center's Publications page.I was particularly impressed by how seemless the discussion went. Despite using Chinese and English, everyone was speaking the "same language." The biggest differences in approach and opinion were among scholars from the US and Europe. We were all using the same concepts and familiar with the same range of methods. If there was a difference it was that Western scholars are probably still a little more comfortable in making theoretical pronouncements based on their data and analyses, but the difference in approaches, at least in economics and political economy, are not what they used to be.

One particular highlight on Sunday was a visit paid by Madame Zhang Yuejiao, a current member of the WTO's Appellate Body. She was extremely impressive in her command of the WTO's dispute settlement process. It seemed to me that she had totally absorbed the norms and approach of the WTO, and likely, is not just a passive user, but also an active contributor to the norms and procedures in the system. It's highly unlikely the Chinese government uses her presence to their benefit -- she was a former MOFCOM official -- but Chinese can certainly be proud of her accomplishments on a very high-profile international stage.

Following Sunday's panels, we adjourned to Bellagio (鹿港小镇) for dinner, a Taiwanese-style restaurant owned by a couple from Guam. And then some stalwarts visited the 81st floor of Guomao Tower #3 (国贸三期) to look out over Beijing. Of course, our view was blocked by smog, which is still sitting over the city as I type. Just as with China's first 10 years in the WTO, much has changed for the better, but a lot of work still needs to be done.

I'm extremely grateful to the entire team that worked hard over several months to make the conference a success.

June 08, 2011

Yesterday the US Trade Representative announced that China has cancelled a controversial subsidy program for its wind energy sector. The US in December initiated a WTO case against China charging that this program, which provided a few hundred million RMB to promote the domestic sector, violated China’s commitments to the WTO.

How big is this victory? On a scale of 1 to 10, I’d say a 4. This was a small program in the grand scheme of things and wouldn’t have blown away any multinational company on its own – at least so tells me a lobbyist for the wind energy sector. Also, the case itself was a bone thrown to the American steelworkers union, which in the Fall submitted a several thousand page petition to USTR claiming massive Chinese violations across a wide range of areas. Out of those several thousands of pages thrown at the wall, only one small program “stuck.” It is still possible that other elements will eventually make their way into a WTO case, such as export controls on rare earths, but this is a minor case on its own.

I give USTR a 4, and not lower, because although this program is relatively insignificant, the case further turns the spotlight toward subsidies writ large across China’s economy. There are many subsidies, explicit and implicit, in most sectors. Many of them may be economically justifiable, but in the era of the WTO, it’s the legal rationale that gets most of the attention.

Historically, USTR has attempted to only launch cases that are clear winners on the evidence, have industry support, and are highly valuable. On its own, this case is not worth a lot of money, but perhaps as it is tied to a broader argument about subsidies, it will in hindsight be seen as more substantial. Time will tell which way the wind blows.

May 23, 2011

Apologies for not posting recently. I arrived in Beijing May 10th and have spent the last 2 weeks just getting my bearings and setting up the RCCPB's Beijing office. Things are beginning to calm down and fall into place; so I should be writing in the space more regularly.

Andrew Higgins of the Washington Post has a wonderful article today on the tussle between American and Chinese furniture makers. Facing a "tsunami" of Chinese imports, US furniture makers got together and brought an antidumping case against the Chinese. They won a 7% tariff penalty, which actually is extremely low, but high enough to put pressure on the Chinese, who are facing higher labor costs and a gradually rising RMB. So the Chinese have responded by moving much of their production from Dongguan, in southeastern China just north of Hong Kong to Vietnam. By being in Vietnam, they pay lower wages and avoid the penalties instituted against Chinese furniture makers.

This may sound like a dirty trick, but nothing about antidumping is clean, from how tariff penalties are calculated (a fig leaf of technicalites covering arbitariness) to the ruling process (the empowered panelists are from the plaintiff's home government and are lobbied by local legislators). Though not mentioned in the story, the Chinese response -- to move -- is also not uncommon. BASF, the world's largest chemical company, has multiple factories around the world not only because it is economically efficient to do so, but because it also makes it easier to get around antidumping penalties. When hit w/ margins on a product made in one factory, they can simply move production to another facility. In the Chinese case, they built new factories from scratch.

One of the neat twists of the story is that the primary investors in the factories are actually not Mainland Chinese, but Taiwanese. So it's really about a Taiwanese, not Chinese move, to Vietnam. With no strong ties to the central government and no long-term commitment to employ Mainlanders, it was not a hard decision to move to Vietnam. I actually think moving is a strategy open to Mainlanders in this and other sectors as well. Of course, the US wouldn't mind if they moved their furniture production to America; that may happen for other more capital-intensive sectors with high transportation costs, but I don't expect that will be the final result in this case.

May 08, 2011

As loyal readers may recall, I was in Shanghai with a group of Indiana professors, businessmen, and journalists. Among the group was Greg Lattimore Andrews, managing editor of the Indianapolis Business Journal and great nephew of famed China specialist Owen Lattimore. Using information provided by some Shanghai history buffs, including Paul French, we tried to find the office of Arnhold Brothers, where his uncle worked for a few years in Shanghai. We didn't find the exact address that day, but we thought we had found a building that could have been where Lattimore worked. So we took a picture and posted it to this blog.

Turns out we were wrong, but only by a block or two. Paul French, host of the blog China Rhyming, followed up and found the right building, which is at 320 Jiujiang Road. Case solved! Many thanks to Paul and others who helped with the detective work.

April 27, 2011

Yesterday the American Chamber of Commerce in China, located in Beijing, released its annual White Paper on the business environment in China. This lengthy document analyzes the evolution of Chinese policies across a range of issue areas and regions and the economic environment for American firms operating in China. AmCham uses a detailed survey of its members as well as information from additional research and interacting with the Chinese government. The White Paper contains both analysis and specific policy recommendations.

The US-China Business Council serves mainly as a business association representing a wide swath of international companies that do business in China, but it also provides customized consulting for individual members. Most of the Council's members are also AmCham members. Although the Council does not issue an annual white paper, it does release occasional reports and its staff testifies before Congress and privately offers advice to the US executive branch and the Chinese government.

Given their overlapping constituencies, it is somewhat surprising that the two organizations recently have struck different notes on China. Both organizations identify positive and worrying trends, but their emphasis differs. AmCham's phrasing is: Our companies are doing well, but the policy environment is worsening. By contrast, the Council's consistent message is: There are some worrying signs about the policy environment, but overall things are going in the right direction in China. AmCham seems to be ringing alarm bells, while the Council is tooting a small bicycle horn.

The White Paper shows that American companies are still doing extremely well in China. 78% of respondents said they are profitable or very profitable, compared to only 71% in last year's survey. Most firms say their incomes have gone up subtantially. However, arrayed against these positive macro trends are worrying policy developments that are presenting severe challenges to their members. Over a quarter of respondents say that "Indigenous Innovation" policies are negatively impacting their business. Many believe that the protection of intellectual property rights is not improving, and opportunities for government procurement are threatened by various buy-local incentives or even orders.

Given these challenges, AmCham makes a case for more forcefully raising these issues with Chinese officials and offers a long list of suggested reforms.

The US-China Business Council comments about worrisome trends in China's business climate, including reports on Indigenous Innovation. Many of these have extensive details about policies that may be harmful to US interests, but these reports do not strike a worrying tone. They appear to be intentionally dry, fact-based descriptions of the current scene and avoid preaching as much as possible. At most, they mention "international best practices" China should seek to follow. But otherwise, they are highly respectful and avoid being seen as emotional or critical.

A good example is a paragraph from the executive summary of a recent report on indigenous innovation policies:

The Council also appears to believe that the key to responding to the challenge of China's policies are not pressuring China to change but rather having the US government adopt policies that promote innovation and the competitiveness of US industry at home and abroad. The Council also released this month a 28-page report, "China and the US Economy: Advancing a Winning Trade Agenda, A Guide for the 112th Congress." No where in the report is there a mention of Indigenous Innovation or many of the other concerns that appear in AmCham's White Paper. The report highlights the continued prominence of American manufacturing, the small percentage of American manufacturing that has moved to China, and China's much lower per capita income.

The tone from AmCham now sounds more similar to that of the U.S. Chamber of Commerce, based in Washington, D.C. The US Chamber represents a wide variety of corporate interests, including firms that doing well in China and those that see China as a competitor. For many years, AmCham sounded more sympathetic to official China, but that phase seems to have passed. It is now the Council that looks distinctive among this group.

None of the above is meant to pass judgment on either position, just to note the apparent differences in approach. Given that AmCham and the Council have overlapping membership, one wonders what is the source of the difference. Perhaps it is that the Council is headquartered in Washington, DC (but with offices in Beijing and Shanghai) and needs to interact more with Congress. Or perhaps this difference reflects the contrasting styles of their leaders, John Frisbee in the case of the Council and Chris Murck in the case of AmCham. Or perhaps we have a game of good cop-bad cop being played.

I have no idea which it is, but look forward to continuing to engage in chamber-ology -- searching for clues in their respective statements -- in the years ahead.

April 25, 2011

I've been trying to catch up on reading and lately came across some interesting stuff:

1) David Wolf, writing in Silicon Hutong, has a nice piece analyzing the burgeoning standards war for smart-phone operating systems. Baidu just announced it will soon offer its own version in an already crowded field. There are at least seven globally relevant smart phone operating systems, and there are three others available in China, offered by China Mobile, China Unicom, and Kai-fu Lee's Innovation Works. Wolf notes that all this competition creates consumer confusion, but he points out that only 7% of mobile subscribers in China have a smart phone, and hence, in the Chinese context it makes sense for there to be a period of operating system competition.This contest over smart phones is similar to the old conflict over video player formats -- SVCD, CVD, EVD, etc. And at least from what we know, the initiative for the contest appears entirely commercial; there may be government subsidies lurking somewhere, but the inspiration seems to originate in the creative minds of business executives, not bureaucrats.

2) The US-China Economic and Security Review Commission (USCC) held a hearing on trends in Chinese foreign policy on April 8. The most interesting panel from my perspective was on "New Interest Groups in Chinese Foreign Policy." Although there's some debate about what constitutes a "real" interest group" as opposed to a branch of the Chinese regime, the three panelists collectively demonstrate that Chinese companies, banks, and bloggers are playing both a direct and indirect role in the policy process. This trend is driven by globalization, the spreading interests of Chinese industry around the world, and technological trends that make it easier for all of us to join the public sphere (my word, not theirs).

3) The USCC also just issued a report with its take on China's Indigenous Innovation policies. Although there are worries about China using a variety of policy levers to ply technology knowhow from foreign hands, the most interesting thing about the report is that it is quite skeptical that China's policies will lead to extensive innovation. If so, foreign firms need to grab hold tight of their IPR now, but this policy initiative is not the long-term threat many worry about.

This reminds me of an interview a few years ago. An executive from an American telecom firm told me that despite the headaches, some in his firm want China to continue its top-down policies to promote innovation because they are so unlikely to succeed; if the Chinese government were to actually be a much greater promoter of genuine innovation, through reducing barriers to market entry, encouraging non-state financing of product development, reforming the education system, etc., then Chinese industry would present a much greater challenge to his company.

4) Two different takes on Huawei and Chinese telecoms abroad: One is from Bloomberg, highlighting the importance of China Development Bank's $30 billion line of credit to Huawei. The second is a piece on the presence of Huawei and ZTE in the Middle East written by William Foster and Hannah Thoreson. Foster and Thoreson see Huawei and ZTE as commercially driven companies, but they highlight how their Internet filtering technology has been widely adopted across the Middle East. "Taking advantage of security tools and techniques developed in the Chinese market," they write, "Huawei and ZTE help their overseas partner telecom companies fashion networks that meet the information control needs of their domestic governments." Not surprisingly, the companies haven't run into the same kind of scrutiny they have faced in the United States and India.

5) On April 6th, American Ambassador to China Jon Huntsman gave what was billed as a "farewell speech" in Shanghai. It stands out for both his commitment to cooperative solutions to address thorny problems in the relationship, but also his frustration with the limits on civil liberties in China that has made it harder to have an open conversation between the two countries, which he suggests helps explain the continuing misunderstanding and distrust. I came across a thoughtful Chinese response to the speech in Wen Hui Pao penned by Guo Xuetang, a professor at the Shanghai University of Political Science and Law. Although Guo also wants the two countries to reduce misperceptions and find ways to peacefully co-exist and cooperation, he sees the burden for change as on the American side. Americans need to remember, he says, that China is recovering from over a century of mistreatment from the outside world; moreover, China is a larger powerful country that deserves America's respect, but it is still developing, and hence, its international responsibilities must remain limited. This certainly sounds self-serving from an American perspective, but it is not an uncommon view in China. The question is whether there is space for imagination in both countries to find common group: Can Chinese recognize that an American call for great liberalization in China is not part of a conspiracy to contain China but is actually suggested with China's interests at heart? And can Americans recognize that given China's history and American deep intervention in many countries around the globe that Chinese understandably might see the various elements of American policy toward China as part of a self-interested plan to keep the US on top?

April 20, 2011

A well-intentioned Al Kamen writes in his blog today that he is upset 10 members of the Senate and their families are on a study tour to China, or what he calls a "junket," a term of derision to suggest that American tax dollars are being wasted on luxury hotels, site-seeing, expensive food, and anything pleasurable your mind can conjure up. Anything but doing work that is in America's national interest. The vast majority of comments on his blog consisted of cheerleading.

Pardon me for raining on the righteous indignation parade, but as a global power American politicians need to understand the world, and the best way to do so -- besides reading books (and who does that?) -- is to travel. American officials, particularly members of Congress, travel abroad far, far too little. The more "junkets" they take, the more responsible American foreign policy will become.

Given China's growing importance to the global economy and international security, it is particularly important for officials to visit the People's Republic and its neigbhors. I was honored in May 2009 to be able to accompany Congressmen Rick Larson (D-WA) and Mark Kirk (R-IL) [now a Senator] on an 8-day study tour across China to better understand trends in China's economy in the wake of the financial crisis. The trip was organized by the National Committee on U.S.-China Relations, the leading American organization dedicated to promoting greater mutual understanding and people-to-people relations between the US and China. We met with Chinese political leaders in different regions, top decisionmakers on economic and financial policy, and representatives from American and Chinese industry. We stayed at nice hotels and ate good food, but we were typically on the bus before 8:00 am and not back in our rooms until after 10:00 pm. I don't agree with all the policy positions of the two members I accompanied, but I admire the dedication they and their staffs demonstrate by putting in such long hours and being genuinely interested in learning what is going on in China and how it affects America and the rest of the globe. I can be as cynical as anyone about politics and am disheartened by the ballooning budget deficit, but here is one area where the Senate (and House) are moving in the right direction at a modest price.

So unless there is something really strange that has not come out about the Senators' current trip to China, I have only four words for the group: yi lu ping an (safe journey)!

April 07, 2011

One of the highlights of the just-completed China study tour was the inclusion of journalists. Chris Fyall, a young and energetic reporter with the Bloomington Herald-Times, Greg Andrews, the equally energetic, though slightly older (seasoned?), managing editor of the Indianapolis Business Journal, and George Vlahakis of IU's Office of University Communications were all terrific. Chris, who must not need sleep, filed several stories in the midst of the trip. (When we returned I heard many people remark about the quality of the pieces.) Greg and George both kept blogs as we traveled, and Greg then made China the cover feature for the March 28-April 3 edition of the IBJ. George also took a few thousand photos -- literally -- several of which made it onto his blog, and many others were burned onto CDs he shared with the group.

One special element of their participation is Greg Andrews' special connection to China. His full name is Greg Lattimore Andrews. His great uncle was Owen Lattimore, one of the world's foremost China experts of the 20th century; and his grandmother, Owen's younger sister, was Eleanor Frances Lattimore, who herself was a famous author of children's books. If you haven't read Little Pear to your children, you should (even if your kids are 40). Owen and Eleanor's parents moved to China at the very turn of the century to teach English, first living in Tianjin before moving to Shanghai, where Eleanor was born in 1904. (Owen and Eleanor had 3 other siblings - Katharine, Isabel, and Richmond.) After going to school in the West, Owen returned to China and in the 1920's worked in the insurance division of the British firm, Arnhold Brothers & Company. Part of his job involved traveling to western China to learn about the risks some of their clients faced, and that is how he originally became an expert in a part of China so few westerners (or Chinese) ever saw. Those skills were later translated into positions with the US government (he helped the US and its allies understand Mao and his Communist movement when the CCP was based in Yan'an, in northwestern China) and then as a scholar at Johns Hopkins University. McCarthy singled Lattimore out as one of the "Communists" lurking in the State Department, a total fabrication, but enough to force Lattimore out of Hopkins. He left the US and taught at the University of Leeds in the UK. Lattimore returned to the US much later in life and passed away in Rhode Island in 1989.

Having not learned of Greg's family connections until well after he had agreed to participate and just a couple weeks before we left for China, one side goal of the trip became to find the home in Shanghai where Owen and Eleanor lived. I put a call into my favorite historians: Jeff Wasserstrom, formerly of IU and now at UC-Irvine, has written some great books about Shanghai, including Global Shanghai; and Bill Rowe, who has taught history at Hopkins since the early 1980's. Bill didn't have any info on Owen's old addresses in Shanghai, but he shared a wonderful article (Download Rowe Lattimore JAS 2007) he wrote about Owen's scholarship. Jeff didn't have any details either, but he put me in contact with Shanghai officianado Paul French. Given his authorship of The Old Shanghai: A-Z, I figured we were in luck. I told Paul where we thought Greg's relatives had lived (in something called "The American Compound"), but that didn't yield any more substantial clues. He then put me in touch with another Shanghai specialist Tess Johnston, but her expertise is on the 1930's and 1940's, a little too late for us. So we boarded the plane to China thinking all was lost. Heck, even if we had an address, we figured that the building would have long been torn down and replaced by one of Shanghai's 5,000 high rises.

A couple days into the trip, Paul emailed me with one last suggestion. He said I should try Greg Leck, another Shanghai expert whose interest was the first few decades of the 20th century. I emailed him my final plea, and low and behold, he responded:

My 1916 directory does not show him [Owen], but my 1921 directory already has him moved out to Tientsin, to which he returned from his sojourn in Shanghai, to take up a journalist position. The best I can do is give you the address of his Shanghai workplace: Arnhold Brothers & Co., Ltd. (He worked in the insurance department.) Arnhold Building, 6 Kiukiang Road, Shanghai. (The company moved to Sassoon House at 1 Nanking Road around 1930, but Owen was long gone by then.)

He wrote "best" as if to apologize, but to us, this was fantastic. We had a real place and building to connect Greg to his family. I wrote to Paul and thanked him, and he responded with even more encouragement that made us more excited.

Just to let you know the Kiukiang Road (Jiujiang Road) building of Arnhold and Brothers still stands magnificently on the street and also has a plaque on the building identifying it as the former Shanghai office of Arnhold's. It's well worth a visit and you'll also find some other Arnhold buildings from slightly earlier round the corner on Dianchi Road (formerly Jinkee Road) - these two are identified by plaques on the outside.

So on Friday, March 18, we set out to complete the journey. After wrapping up very interesting visits to Tianma Micro-Electronics and Cummins Fleetguard, we took our charter bus from Pudong back into Puxi (the western side of the Huangpu River) with the rest of our group, but then had the bus drop the two of us off at the first convenient place it could pull over. We then walked 3-4 blocks to get to Jiujiang Lu (九江路), which is the more common way Kiukiang is transliterated into a form non-Chinese readers would understand. We started at about 700 Jiujiang Lu, and the numbers got smaller in the direction of the Bund, so that's the way we went. With even numbers on the left side of the street, we expected sooner or later we would have to run into 6 Jiujiang Lu. Block by block we went, and the numbers got smaller and smaller. I could then see we were getting closer to the Bund, and as we did the buildings began to look older and some of them had plaque on the walls identifying the historical roots. But we were running out of blocks, because the Bund is at the river's edge. When we got within 50 yards of the end of the street, I looked at the last building on the left, and it was something like #36 Jiujiang Lu. The plaque on the side of its cement face gave no indication of the Arhold Brothers & Co. To focus on something different, we crossed the street to the bund itself and enjoyed the skyline view of Pudong and the river and talked to a few curious Chinese. We then crossed back over and decided, hey, let's walk back up on both sides of the street, thinking that perhaps the street numbers since the 1920's had changed, and we should focus on the plaques rather than the address. We did this for about 15 minutes without any clear luck until I happened upon an old man sitting in a booth next to one of these buildings. I explained Greg's story thinking nothing would come of it, but I got an interesting answer. The man, who was serving as a guard for one of the buildings, or at least its parking lot, said that although he himself was born "after Liberation," that is, after 1949, he thought the building directly next to his had at one point been owned by a British company. So we went to give it a second look. We walked all the way around it and found no plaques; we peered through some glass windows, and the inside was currently being entirely renovated. It was stripped bare, with nothing of note inside, and just a light white-gray facade on the outside.

We got no confirmation this was the right place, but we were tired. We had exchanged emails with Jeff, Bill, Paul, Tess, and Greg, and Greg Andrews had consulted his living relatives and even some of their family papers. Despite not being sure, we decided to adopt this building as part of Greg's heritage. In front of it he stood, and I clicked away (iPhones have a nice fake clicking sound).

It's very likely we did something wrong in the search -- that there may be a different Jiujiang Lu, or we should have been at WEST Jiujiang instead of EAST Jiujiang, or we passed by the right building and were just too stupid to notice it, or it was just around the corner and we would have seen it had we taken 10 more steps in this or that direction.

But for now, that's irrelevant. Perhaps for no good reason, Greg and I now are nostalgic about this building. It may or may not be where Owen Lattimore worked in the 1920's, but it was where Greg Lattimore Andrews stood in 2011, and we know for sure his great uncle and grandmother walked these streets and stood along the bund and admired the beauty and vibrancy of where they were. What's a block or two when you've circled half the globe? We may not have found "history," but Greg lived a little more of his family's history. And for that reason, it was an exciting day.

If any of you Shanghai specialists out there know what we did wrong, don't tell us! No, I'm kidding. Please do let us know where we should have gone, and where we should have stood. And if you have a photo, even better! You'll earn a free coffee at the Starbucks nearest to Owen Lattimore's office. Now, I wonder, do you think Owen liked coffee?

I'm way behind in blogging about a million things, including IU's recent study tour to Hangzhou and Shanghai. Carried out under the theme, "US-China Business Cooperation in the 21st Century," the trip was a terrific success, as you can see from two other blogs: "IU Takes You to China," maintained by IU's George Vlahakis; and "The New China," by the Indianapolis Business Journal's Greg Andrews.The RCCPB itself has a page devoted to the trip, at www.indiana.edu/~rccpb/Chinatrip.html.

A few things stand out about the trip:

Our delegation members got along great! We were a motley crew of scholars of politics, journalism, and business, thrown together with journalists and business executives. You would think everyone would have their own agenda, some would walk really slowly and others would be running ahead, some would want McDonald's and others would want the strangest things from foodstalls, and some would want to meet movie stars and others beggars on the street. And that we'd get on each others' nerves. That would've been a great soap opera, but it didn't turn out that way at all. Again, we got along great! No whinning, no complaining, no taunting, and no "when are we gonna be there?!!!" A couple folks were squeemish about driving down the wrong side of the road to get through a traffic jam (Shanghai's traffic situation has deteriorated big time), firmly grabbing to their seat handles and tightly closing their eyes, and some of us saw this as great fun and standard practice -- the yellow lines in the road are just suggestive. But in general, we followed Hu Jintao's dictum to be a harmonious group.

Second, the quality of scholarship we encountered at Zhejiang University is first-rate. I may be leaving some folks out, but I was just immensely impressed. Three participants in the conference stood out: Wei Lu (韦路) from the College of Media and International Culture, who presented the findings from a sophisticated study of Internet usage that found the wealthier you are the broader your use of the Internet; Zhao Jun (赵骏) from Guanghua School of Law, who presented research on international investment and stepped in to translate flawlessly with zero notice; and Wang Zhikai (王志凯), from the School of Economics, who took on the job of organizing the specifics of our conference at Zheda and many other details of our visit. I also was fortunate enough to give a lecture on business lobbying to a (small) packed room at the College of Public Administration. Host and vice dean Yu Jianxing (郁建兴) offered some terrific comments, as did grad students and faculty in the audience.

Many of the Chinese with whom we spoke were very worried that the country was falling into what one person called, a "middle income trap," in which the progress of the last three decades was coming to halt in the face of greater government intrusion into business and the lack of a positive business environment for innovation and expansion. At the symposium, a local company executive made an impassioned argument for more extensive economic and political reforms. One cannot, of course, dismiss such concerns -- they live them every day -- but it is odd that from the outside China looks like it is rising as fast as could be; Americans, Europeans and others believe it is they, and not Chinese, who are hurting the most these days. How could these companies, with China's 11% growth and $2.6 trillion in foreign exhange, be suffering? Explaining these conflicting perceptions is going to be an important task for years to come.

We visited a handful of companies in a variety of sectors, and the distinction between Chinese and foreign seems more irrelevant than ever. Shanghai GM, a JV between GM and Shanghai Auto, is it American or Chinese? Our host, David Chen, was originally from China, but studied at Purdue and worked in the US for a long time before returning to China for GM. Crown Biosciences, a company officially based in the US but with facilities in Beijing, Taicang and Wuhan, is run by Chinese who used to work for Eli Lilly, and one of them taught at Indiana University. One gentleman who showed us around studied at Cambridge and had a nice British accent. They are prepared to comply with both Chinese government and US FDA regulations. Tianma Micro-Electronics, a producer of flat screens, is owned by the centrally-controlled China Aeronautical Technology Group (中国航天科工集团), but it is listed on the Shenzhen Exchange, its production technology and processes are almost entirely Japanese, and its chief technology officer spent years in Silicon Valley. And Cummins Fleetguard, co-owned by Columbus-based Cummins Engine, is a joint venture located in Pudong; almost everyone in the plant was Chinese, and the manager of filtration for Asia-Pacific, Mark O'Connor, is originally from Australia.

Finally, on Friday, March 18, we had an awesome reception on the 40th floor of the Shanghai Hilton with about 90 guests, including IU alumni, current students, and friends from the broader business community. Even friends attended from the humbly named Lord Corporation; my brother-in-law Scott Thompson works in their Erie, Pennsylvania facility. It was wonderful to be with such a great group of Hoosiers and friends of Indiana.

All in all, a great visit, and I'm deeply grateful to everyone at IU, Zhejiang University, the journalists and business executives who accompanied us, and the organizations we visited for making it possible.

March 20, 2011

I usually hate re-makes, but I was looking forward to seeing the new version of the 1984 movie Red Dawn. The original centered on how Americans in a small town repelled a Russia invasion. The new version was supposed to feature Chinese invaders bearing down on Michigan. But apparently because of concerns of how the movie would affect its business with China, the movie is being re-made to substitute North Koreans for Chinese.

A very good article in the Los Angeles Times reports that "the filmmakers now are digitally erasing Chinese flags and military symbols from "Red Dawn," substituting dialogue and altering the film to depict much of the invading force as being from North Korea, an isolated country where American media companies have no dollars at stake."

MGM may have saved some China business, but they're going to lose me. I'm not worried in the least about a North Korea invasion of the US. I think the chances of the Chinese crossing the Pacific are also ridiculously small (and I don't like fear-mongering against any country), but the thought plays into the collective American imagination, however warped, of a threatening China on the rise and on the march. North Korea scares Americans because it has nuclear weapons, and that doesn't fit with the premise of Red Dawn.

March 13, 2011

The WTO ruled on Friday that America's simultaneous institution of antidumping and counterveiling duties on the same Chinese products violates basic WTO rules. This is the most important ruling in China's favor during the first decade of its membership in the world trade body.

A WTO panel originally ruled in October against China and for the United States. Two issues were central to the case: whether the US could simultaneously institute AD and CVD penalties against Chinese products, and whether to characterize Chinese state-owned enterprises and state-owned financial institutions (banks) as "public bodies," that is, as government-like organizations whose activities inherently benefitted from subidization. In December the WTO panel found for the US on both issues, a decision that was absolutely disastrous for China. Not only did the WTO condone extremely high US trade penalties, it characterization of all SOEs and banks as public bodies meant that China would be vulnerable to high trade penalties in perpetuity simply because the state-owned sector is such an important component of the economy. Even private companies would have been seen as constant recipients of subsidies as long as they did business with SOEs or borrowed a dollar from a Chinese bank.

When China joined the WTO, it agreed that in its first 15 years of membership it could be treated as a non-market economy in the context of trade remedies cases. This has made it easier for China's trade partners to slap high tariffs against Chinese goods without needing to collect the requisite data from Chinese companies about product prices and costs. But China was looking forward to this situation expiring on December 11, 2016, and moreover, it had already persuaded over 80 countries to formally recognize it as a market economy.

The latest decision pulls China back from the precipice. Not only did it find that the way the US instituted dual penalities resulted in double counting; even more importantly, it rescued China from being permanently treated as a non-market economy, essentially a trade penalty pinata for anyone to take a whack at whenver they desired. Chinese banks are still vulnerable to such charges (and this could be critically important in future disputes), but the finding that SOEs are not inherently public bodies is incredibly important.

If the original ruling had stood, China and other countries with a substantial state-owned component to their economies would permanently have been treated as second-class citizens in the WTO. While beneficial to certain interests in the US and elsewhere, it would have reduced the WTO's legitimacy in the eyes of China. And keeping China committed to the system is extremely important to everyone who wants to limit the expansion of protectionism and generate global economic growth.

March 11, 2011

I'm leading a delegation of IU professors, Indiana business executives, and local journalists on a trip to Hangzhou and Shanghai during Spring Break. We leave in a few hours. We'll land at Shanghai's Pudong International Airport, then take a two-hour bus ride to Hangzhou. There we'll participate in a conference hosted by Zhejiang University, IU's strategic partner in China. Because Indiana and Zhejiang are both along the coast, it's natural they are sister state-provinces. :)

Following the conference, we'll visit with the Zhejiang government, a TV station, and tour several companies, including Alibaba and Geely. We'll then make our way to Shanghai, with a few more visits, including to Crown Biosciences, founded by former IU professor and Eli Lilly researcher, Faming Zhang. We'll also tour Shanghai General Motors, Cummins Fleetguard, and the LCD/flat panel manufacturer Tianma.

While I'm thrilled to be traveling with my colleagues and three terrific entrepreneurs -- Mat Orrego of Cornerstone Information Systems, Matthew Neff of University Health Management and CHV Capital, and Ben Shobert of Teleos -- I'm particularly excited about the two journalists coming with us, Chris Fyall of the Bloomington Herald-Times and Greg Andrews of the Indianapolis Business Journal. The Midwest media covers China some, but not to the extent it needs to. So our center created a program to help Indiana journalists better understand China and figure out how to report on the country in a way that is relevant to their audience. Chris and Greg are visiting China for the very first time. I've visited so often that it's easy to lose the thrill of the trip. Not this time. To make things even more exciting, Greg is Greg Lattimore Andrews. His great uncle was Owen Lattimore, one of the West's first China specialists. Owen and Greg's grandmother, Eleanor, lived in Shanghai from 1904 to 1920. One scholar we are meeting translated Owen Lattimore's memoirs. Now if we could only find where the Lattimores lived, that would be so, so cool.

I'll write more in this space as the trip progresses. But you can also follow us through the blog, "IU Takes You to China" (印大华夏行). Its author is George Vlahakis, a manager in IU's Office of University Communications. This is also George's first trip, and I'm excited to see China through his eyes.

(Full disclosure: Faming Zhang, Mat Orrego, and Ben Shobert are on the advisory board of the Research Center for Chinese Politics & Business, which I direct.)